Open Banking is evolving into Open Finance, where insurance, pensions, and wealth data flow through APIs alongside banking data. What is the biggest obstacle to making Open Finance work in practice?

Building a shared trust framework is one of the key barriers to practical implementations of Open Finance. As Open Finance begins moving beyond banking toward insurance, pension funds, and investments, it will rely heavily on interoperability standards; secure identity verification; and clearly-defined customer consent to allow broad participation throughout the ecosystem. The Bank for International Settlements (BIS) and Financial Conduct Authority (FCA) both note the foundational role of trusted data, secure technology, and interoperability as assets that can help overcome coordination and accountability challenges of coordinating large-scale systems, but they're not limited only to these aspects. In practice, organizations struggle to instantiate Open Finance, primarily because of inconsistent data across sectors; a lack of clear management of customer consent; and obscured responsibilities if there is either an error or misuse of customer data. Thus, Open Finance will require more institutions involved; more varied and complex data sets; and longer trust chains between data consumers, than did Open Banking. The organizations that will ultimately successfully drive Open Finance will be those that consider consent, interoperability and accountability core infrastructures, as opposed to considering the addition of AI-and-API layers to legacy systems to constitute transformation.

Hello, Hi, my name is Dennis Shirshikov. My work at Growthlimit.com often involves evaluating how financial infrastructure and digital platforms shape market behavior, particularly where financial data, technology, and consumer access intersect. I also teach finance and economics at the City University of New York, where we examine how regulatory structures and financial data systems influence the practical functioning of markets and financial services. Open Banking is evolving into Open Finance, where insurance, pensions, and wealth data flow through APIs alongside banking data. What is the biggest obstacle to making Open Finance work in practice? Why does data standardization become such a challenge in Open Finance? Financial products outside of traditional banking are inherently more complex in how they are structured and reported. Insurance policies contain underwriting variables, exclusions, and coverage layers. Pension products involve long term projections and regulatory reporting rules. Investment accounts involve portfolio level data that changes continuously with market conditions. When these datasets are exposed through APIs, the challenge is not simply sharing the information but ensuring that another platform can interpret it accurately. Without strong data standards across sectors, two platforms may technically exchange information while still interpreting the underlying data differently, which undermines the reliability of the system. What role does consumer trust play in the adoption of Open Finance? Consumer trust becomes central once financial data moves beyond traditional bank boundaries. In Open Banking the public gradually became comfortable allowing third party applications to access account balances or transaction histories. Open Finance expands that scope significantly, potentially including insurance coverage details, retirement savings projections, and investment holdings. Many consumers are understandably cautious about who can access that level of financial visibility. Unless the system clearly communicates data permissions, security safeguards, and revocation controls, adoption can stall because consumers perceive the system as exposing too much sensitive information.

Transitioning Open Banking to Open Finance is not only about scaling but semantic too. Banking has made progress with its standards such as ISO 20022; however, there still exist financial service sectors such as insurance or wealth management that operate in 'silos' of non-unified data schemas. The largest of these barriers is technical fragmentation, where legacy systems not built to be open are required to communicate through language that is not understood. Practically, we see examples where even though there is an API to access some data, the data payloads are so inconsistent. For example, 'customers' in banking do not resemble 'policyholders' in insurance; and without a common cross sector/common schema to map and translate data in real-time, there is a massive tax placed on innovation due to the cost associated with data mapping. This results in brittle integrations that struggle to achieve and maintain the strict accuracy requirements of financial regulations. Success will require creating an effective governance framework that addresses the inherent risks involved in sharing data across the various types of financial services. It is also important to remember that every API call is made on behalf of someone who wants their financial life to be easier, not branded. Solving the issues of trust and standardization before technical issues is essential for success.

Open Finance evolves from Open Banking by broadening access to various financial services, such as insurance and investments, through secure APIs. However, a major obstacle to its success is data privacy and security concerns. As customers become more aware of how their data is managed by financial institutions, ensuring the protection of sensitive information is critical for Open Finance to thrive.

Open Banking is evolving into Open Finance, facilitating access to various financial services through APIs. However, this transformation encounters challenges, particularly in data interoperability and standards. The ability to share diverse financial data is impeded by different formats, definitions, and protocols among institutions, causing integration issues. For instance, a digital financial management platform may struggle to offer comprehensive services due to these inconsistencies.

The biggest obstacle is consent architecture. Open Banking had it relatively simple because you are dealing with one type of institution and one type of data. Open Finance means connecting insurance providers, pension funds, wealth managers, and banks through a shared API layer, and each of those sectors has fundamentally different consent models, regulatory requirements, and data sensitivity levels. We built API integrations for a financial planning app in Australia that tried to pull superannuation data alongside bank account data. The technical API work was straightforward, but the consent flows were a nightmare. The super fund required a separate consent journey with different disclosure requirements than the bank, and each consent had different expiry timelines. Users were dropping off because they had to go through three separate authorisation screens just to see their full financial picture. Until regulators across sectors agree on a unified consent framework with standardised data schemas, Open Finance will remain fragmented. The technology is ready, the APIs work, but the legal and regulatory patchwork across insurance, pensions, and banking makes it nearly impossible to deliver the seamless consumer experience that Open Finance promises.

The biggest obstacle to making Open Finance work in practice is trust and consistency across the entire financial ecosystem. While the technology to share financial data through APIs already exists, the challenge is getting banks, insurers, pension providers, and fintech platforms to follow the same standards for data access, security, and quality. Without clear and widely adopted frameworks, institutions remain cautious about opening their systems, and consumers may hesitate to allow broader access to sensitive financial information. Another challenge is making sure everyone involved sees real value in participating. For many financial institutions, building and maintaining the infrastructure required for Open Finance adds cost, operational complexity, and regulatory responsibility. If the initiative feels like another compliance requirement rather than an opportunity to improve services, adoption will slow. For Open Finance to succeed, regulators and industry players need to work together to create practical standards and clear commercial benefits so that participation feels worthwhile for everyone involved.

The biggest obstacle is getting consistent, high-quality consent and data standards across very different financial products. In practice, "permissioned access" sounds simple until you hit real-world differences in how insurers, pension administrators, and wealth platforms define accounts, beneficiaries, transaction events, valuations, and even identity. If two APIs both say "balance" but mean different things (cash value vs. market value vs. surrender value, priced at different times), you can't reliably build consumer experiences or compliance workflows on top. From an engineering and operations perspective, the hard part isn't just connecting APIs; it's making the data trustworthy end-to-end: strong customer authentication, durable consent that can be revoked, clear liability when data is wrong, and auditability for regulators. Open Finance works when the ecosystem agrees on common schemas, provenance, and accountability--not just transport.

Open Banking is evolving into Open Finance, where insurance, pensions, and wealth data flow through APIs alongside banking data. What is the biggest obstacle to making Open Finance work in practice? The biggest obstacle is alignment between institutions that historically operate in completely different data environments and regulatory structures. Banking, insurance, pensions, and wealth management systems were not originally designed to share information with one another in a standardized way. Each sector stores financial data differently, applies different compliance rules, and often uses legacy technology that was built long before API based interoperability became a priority. Open Finance requires these institutions to agree on how financial data is structured, secured, and permissioned. Until that alignment exists, the technology may be available but the ecosystem still struggles to function smoothly in practice. Why is cross industry data integration more difficult than it appears? The challenge is that financial products across sectors carry very different types of information. A bank account is relatively simple in structure compared to an insurance policy with coverage terms or a retirement account with long term projections and regulatory reporting layers. When these systems attempt to exchange information through APIs, the receiving platform must be able to interpret that data consistently and accurately. Without clear standards for how these data fields are defined across industries, the integration becomes technically possible but operationally unreliable, which slows real adoption. How does consumer trust influence the success of Open Finance? Consumer trust becomes central because Open Finance expands the scope of financial data that can be accessed by third party platforms. Consumers may be comfortable sharing transaction histories from a checking account, but sharing investment balances, retirement savings information, or insurance coverage details introduces a higher level of sensitivity. For Open Finance to work, consumers must clearly understand what data is being shared, who has access to it, and how that access can be revoked. If the user experience around permission and transparency is not clear, adoption will slow regardless of the underlying technology.